There are three major appointments: Frank Gibeau, currently president of EA Games, will become president of the EA Labels; Peter Moore, currently president of EA Sports, will become COO, overseeing EA’s global publishing organization and online initiatives, including the Origin digital platform; and Barry Cottle, EVP of EA Interactive, will now oversee EA Mobile, Playfish, Pogo, Hasbro and PopCap.

The management changes will be effective Monday.

Along with the promotions, there will be one structural change to the business. EA is expanding from three to four labels — EA Games, EA Sports, EA Play and BioWare — with Gibeau in charge of all of them.

Each label is focused on key game franchises and each is responsible for launching at least one game annually while also creating content for all platforms, including console, PC, mobile and social.

This is the first reorganization since EA CEO John Riccitiello established EA’s label structure when he rejoined the company in 2007; he left in 2004 to be a founding partner and managing director of Elevation Partners, a private equity firm.

In a letter to employees, Riccitiello said that EA has shifted to creating fewer, bigger and better titles with better cost management, while also expanding its digital businesses.

“Our quality has risen dramatically. We’ve built an $800m+ digital business while pushing down operating costs,” he said. “Not all of it was easy but looking back, it was exactly the right structure and priorities for the challenges we faced.”

Gibeau has worked at EA his entire career, joining straight out of college in 1991. Moore was appointed president of EA Sports in 2007, having joined from Microsoft, where he was responsible for leading its Xbox and Games for Windows businesses. Cottle joined EA in 2007 from Palm, where he was COO in charge of overseeing its wireless and Internet division.

Photos: EA’s booth at E3, top right; Gibeau pictured left; Moore pictured right.

“We have a new hardware platform and we’re putting out software every 90 days,” Riccitiello told IndustryGamers. “Our fastest growing platform is the iPad right now and that didn’t exist 18 months ago. … Consoles used to be 80 percent of the industry as recently as 2000. Consoles today are 40 percent of the game industry.”

An interesting observation coming from the CEO of one of the biggest games publishers in the world. It seems that iOS and the devices that run it have indeed created pricing and customer migration pressure for the traditional gaming platforms whose proprietors initially dismissed them.

As Riccitiello observed during EA’s Wednesday earnings call: “Gone forever is the 4- to 5-year console cadence that gave developers ample time to invest and retool for the next big wave. Consider that just 18 months ago, there was no iPad, Google was just experimenting with Android and most big games were limited to a single revenue opportunity at launch. Consider that each of the major consoles now has a controller that encourages users to get off the couch and get into the action. On smartphones and tablets like the iPhone and iPad, the top paid apps are all games.”

Which is true, I suppose. That said, smartphones and tablets do seem to cater more to casual gamers than hardcore ones these days. But continuing enhancements in processing power and graphics and further hardware improvements should make them more appealing to the latter crowd in the future.

The videogame maker, which does not break out revenues for Playfish, the social games division it acquired two years ago, said revenues are starting to ramp, but that the number of users playing its games are flat or down.

In a response to a question about Playfish revenue, EA’s CEO John Ricitiello said during the company’s conference call today, “I would say it’s a one-win and one-loss situation, which we are trying to turn into a two-win category in the next six months. We have not seen the growth in DAUs (daily active users) that we would have liked to see with the last couple releases.”

The company said monthly active users from its social games totaled 32 million, which is far lower than the 52 million it registered in the year-ago period.

Some of that churn has to do with a change in Facebook’s policies that turned off the ability to market games to user’s friends, but even still, EA has been aggressive at rolling out new games, leveraging some of its core intellectual property, such as Monopoly and MLB Superstars.

“DAUs are flat,” Ricitiello said. “But we roughly doubled our revenues. We are moving revenue up sharply. That’s a good thing. … We’ve learned the right lessons around monetization.”

EA Sports President Peter Moore also joined the call today to talk about its three sports titles on Facebook, consisting of Madden, FIFA and World Series Superstars games. He said the average revenue among paying users for those titles has hit $56 in accumulated spending, which is higher than revenue the company receives from players on consoles.

However, Moore acknowledged that the percentage of paying users is in the low single digits.

While this information is not exactly earth-shattering, it provides a small look into the company’s business as it tries to evolve from shipping games in cellophane to pushing out titles to multiple digital platforms, spanning PC, social and mobile.

Plus, the company’s investments in social will grow as it integrates the acquisition of PopCap games into its business. Ricitiello said he sees complementary aspects of the two company’s businesses. While PopCap games has been better at gaining users on Facebook, EA has been better at monetizing them.

“We think there will be strong synergies with their IP,” he said.

Going forward, it will also be important to compare EA’s performance to Zynga, which has registered for an initial public offering.

But there’s not a lot of overlap in the way the two are reporting results. While Zynga discloses its revenues, it does not report how individual titles are performing or the average revenue per paying user. It also admits that a very small percentage of its users pay for items inside its games, but doesn’t provide an exact figure.

Here are two slides from EA’s financial presentation today that break down its digital revenue by platform and by type.

On the first slide, social games revenues are part of PC revenues (in red), which shows it was the fastest-growing segment during the first quarter compared to the same period a year earlier.

On the second slide, social revenues are part of the Free-to-Play category (in purple), which shows that it was also the fastest growing segment in the first quarter, jumping 32 percent over the same period a year earlier.

In fact, State Senator Leland Yee (D-San Francisco), the law’s author, is not willing to go down so easily after waging an eight-year legislative and legal battle that aimed to restrict the sale of some of the industry’s most popular games, like Mortal Kombat and Grand Theft Auto.

“We’ll comb through it and see if there’s something that will pass constitutional muster,” Yee’s chief of staff, Adam Keigwin, told me. “If not, we’ll wait until there’s a change in the makeup of the court.”

Keigwin added, “It’s certainly something the senator is considering.”

Yee currently represents California’s District 8, which includes San Francisco and San Mateo Counties, and is now running for mayor of San Francisco — all areas rich with videogame publishers and developers.

The court, in a 7-2 ruling, said the law violated First Amendment free-speech protections, but four justices left the window open for new legislation that would not violate the constitution. [Here's the full opinion of the court.]

In particular, Justice Samuel Alito indicated the language is too vague to rule accurately, but he would welcome a new version that would address how violent videogames affect youths.

“I would not squelch legislative efforts to deal with what is perceived by some to be a significant and developing social problem. If differently framed statutes are enacted by the States or by the Federal Government, we can consider the constitutionality of those laws when cases challenging them are presented to us,” he wrote.

Justice Clarence Thomas, who dissented, was more blunt: “I would hold that the law at issue is not facially unconstitutional under the First Amendment, and reverse and remand for further proceedings.”

Still, the videogame industry, including the Entertainment Software Association, which was the lead party in the case, considered the ruling a victory.

John Riccitiello, who is chair of the ESA and CEO of Electronic Arts, issued a statement: “Throughout American history, every new creative medium has to fight to establish its rights. Like books and film, videogames have had to face down censors and stand up for creative freedom. This was a long, hard, expensive fight, but it pulled together the developers, publishers and fans into a powerful political coalition. There will be other censors, other challenges. But now we’ve got an army in the field to stand up for the rights of game developers and players.”

The original legislation was passed six years ago and signed into law as Assembly Bill 1179. It called for the prevention of the sale and rental of violent video games that “depict serious injury to human beings in a manner that is especially heinous, atrocious, or cruel,” to people under the age of 18 years.

Retailers who violated the act would have been liable for up to $1,000 for each violation.

In a statement, Yee said: “Unfortunately, the majority of the Supreme Court once again put the interests of corporate America before the interests of our children. As a result of their decision, Wal-Mart and the video game industry will continue to make billions of dollars at the expense of our kids’ mental health and the safety of our community. It is simply wrong that the video game industry can be allowed to put their profit margins over the rights of parents and the well-being of children.”

The Japanese-based games company has revolutionized the market before, and after today’s announcement, it’s obvious that it wants to do it again.

Nintendo did not offer any details on price or timing–other than that it will come out next year. But in the presentation this morning and in a hands-on briefing for media following the announcement, we got a good look at some of the Wii U’s capabilities and how it could change the way we play games in front of the TV.

As the major implications of the device are processed over the next year, here are the three major takeaways from today’s announcement:

1. The Wii U marks the entrance of Nintendo into hardcore games:

Up until now, Nintendo has served a family-friendly niche with games like Super Mario Bros. and Zelda. But going forward, it’s branching into its competitors’ territory by making the Wii U hardware capable of supporting HD graphics and hardcore game play.

During the press conference, game publishers said they would support this move by developing hardcore games for the Wii U.

John Riccitiello, the CEO of Electronic Arts, said over the years he’s made several appearances on stage at E3 to support his partners, but this was the first time he has ever done it for Nintendo. “Imagine a shooter like Battlefield with jaw-dropping graphics brought to you on a Nintendo system with a break-through controller,” he said.

Here’s a look at the quality of graphics on the TV:

The Wii U controller also has high-end graphics, too:

2. The Wii U will compete for the iPad’s time:

In many ways, Nintendo is not just competing against Microsoft’s Xbox or Sony’s PlayStation, but any device that people are using in the home while sitting on the couch. The Wii U also offers a competitive response to Apple’s iPad.

The Wii U has a 6.2-inch touchscreen display and a forward-facing camera, and will be used for more than a remote to the videogame console. For instance, users can browse the Internet, draw sketches on the screen with a stylus, play standalone games like Othello, view photos and participate in video chat.

It can also be used with the Wii Fit’s balance board to weigh yourself without ever having to turn on the TV.

Nintendo said the controller is not designed to leave the home and therefore, we surmise, they don’t intend for it to compete against its own portable 3DS gaming device.

Nintendo demonstrates how the Wii U is used for Web browsing:

3. Nintendo won’t stop here. You can bet there will also be a digital strategy:

To be sure, today’s sneak peek was only a glimpse into the future.

Nintendo touched on the hardware capabilities of the Wii U and how it will interact with the Internet, but from what we are hearing separately, there will be a strong digital component.

Riccitiello alluded to it on stage. “We are changing games from a thing that you buy to a place that you go,” he said. “Nintendo’s next platform has deeper online capabilities. This is an unprecedented partnership between EA and Nintendo.”

For perspective, the Wii U tablet is about the same size as an open 3DS:

More From E3

• At E3, Xbox Lets Kinect Lead the Charge on Gaming, Live TV Ambitions
• Justin.tv Broadcasts Gamers’ Every Move on TwitchTV
• Who Needs War? Sparks Will Fly in EA’s New Sims Game for Facebook.
• Sony Unveils Vita Gaming Device at E3; Will Launch This Year for $249
• E3: Nintendo Unveils the Wii U With Tablet-Style Controller
• Three Key Takeaways From Nintendo’s Wii U (Plus Photos!)
• No Hacks to Report at Xbox, But Microsoft Isn’t Letting Its Guard Down
• Forget About 99 Cents, What If You Could Rent Mobile Games for 25 Cents?
• Digital Game Revenues Hit $5.9 Billion in 2010

It argued that instead of creating hits that are sold on store shelves for videogame consoles, the Redwood City, Calif.-based company wants to take popular franchises, like Madden or Need for Speed, and digitally distribute them across a number of platforms, such as mobile, social and PC, to create recurring revenue streams.

Riccitiello was unwavering in his commitment:

“The consumer has changed. 200 million console players have become 1.5 billion consumers gaming on multiple devices,” he said. “Today, we are a very different company….From here, it is about building a better, more predictable, and more profitable business, a business that is less dependent on individual hits and more deeply anchored in the ongoing monetization of game franchises.”

But the big question is whether EA can turn the ship when there are 8,000 employees on it who are used to doing business the old way.

Habits are hard to break, especially when it requires replacing a controller with a mouse or a touchscreen. In the meantime, some of its more nimble competitors are getting most of the credit as the industry shifts to digital.

For example, earlier this year, we watched as the private market valuation of Zynga–EA’s much smaller and younger competitor–exceeded EA’s public market valuation. Zynga was reportedly worth between $7 and $9 billion, while EA was valued at roughly $6 billion.

Today, EA’s market cap stands at about $7.25 billion.

Zynga, which makes such Facebook games as FarmVille and CityVille and has dabbled in mobile games, reportedly had revenues of $850 million in 2010. In comparison, EA’s digital revenues totaled $833 million for its fiscal year 2011. (Meanwhile, its overall revenues totaled much more, or $3.6 billion.)

Still, smaller competitors, such as Zynga, which strictly make money from digital revenues, are viewed as not having a lot of baggage and can go hard after something new without sacrificing the old.

Just last week, there was a sign that EA wasn’t winning that battle–even internally.

Electronic Arts disclosed that its COO John Schappert resigned. Rumors indicated that he was joining Zynga, although Zynga has not confirmed the appointment.

Despite that potential set-back, and EA’s public perception, it has been trying.

It has been on an acquisition spree for the past couple of years, picking up everything from Playfish, a social-games developer, to Chillingo, a mobile-games publisher. Earlier this week, it bought a small mobile-games studio called Firemint. (Of course, those investments also become a curse because they have to start paying off.)

Beyond acquisitions, it has also re-prioritized the work it was doing.

On the call, Riccitiello said that involved paring back the number of titles it was making from roughly 70 to around 20. While that was something of a defensive move, he said they are now shifting to offense, by picking the game franchises they do decide to build and porting them across several platforms to increase their profitability. “Over the coming years, we will transform EA from a packaged goods company to a fully integrated digital entertainment company.”

He calls it the “games-as-a-service” model, which is comparable to the software industry switching from a licensed packaged goods model to SAAS, or software as a service, several years ago.

Under this philosophy, he said, they will rely on intellectual property and strong brands, such as EA sports and Hasbro, and build out a platform of registered users that can be marketed to (in Q4, it had 112 million users, roughly twice as many from a year ago). It’s also making managers experts across mobile, social and console, rather than making silos for each category.

“It’s a big change,” Riccitiello said. “As an investor, you can see this as a way to better manage our IP, and drive up the ARPU for our core properties.”

At least one analyst was reluctant to believe the transformation could take place. How does Riccitiello plan to get everyone on board?

“If only you could spend a couple of weeks with us,” Riccitiello joked.

His more serious answer was that they’ve spent the past three years conducting a managerial change: “We’ve identified intellectual property owners inside of our company, and we’re sort of organizing around that.” Those individuals are charged with plans that involve console, PC, mobile, social and a variety of business models, including microtransactions and subscriptions.

The change will be relatively slow. This year the company is projecting digital revenues to total $1 billion, increasing roughly 20 percent over 2011.

And despite all of its efforts, the company will face other challenges, including some that are out of its control. For instance, the company’s EA Sports business is facing two potential league lockouts and this year there won’t be a FIFA World Cup title. Those three things represent roughly a $250 million revenue gap.

It’s also launching its biggest launch campaign for a game in EA’s history for Battlefield 3, and it’s unclear when the highly anticipated launch of Star Wars, an online multi-player game, will occur. Depending on when it is ready, EA’s earnings per share could fluctuate by 15 cents.

Overall, at least some people were sold on the picture Riccitiello painted.

The company’s stock increased a modest $1.76 a share yesterday, or roughly 8.8 percent, to close at $21.68. And Piper Jaffray analysts raised their price target on EA’s shares from $19.50 to $25.00.

The videogame maker posted a GAAP loss of $322 million, or 97 cents a share, on revenues of $1.1 billion. However, when stock-based compensation and revenue deferrals are excluded, the company recorded a 59-cent profit, jumping 33 cents from the year earlier.

Those modified numbers beat expectations of analyst who forecast the company’s earnings to surge 76 percent to 58 cents a share from the year-ago period, according to Thomson Reuters.

It is now the fourth quarter in a row that EA has beat consensus.

Meanwhile, the company continues to try to call attention to its digital results as it transitions its business model–from one where gamers pay $60 for an Xbox title to one where consumers pay a few bucks for an iPhone game or play Facebook games that may be free and monetized through other mechanisms, such as virtual goods.

But it’s hard to convince anyone of the prospects when its packaged-goods business generated $1.1 billion in revenues and its digital games generated a paltry $211 million.

Still, its digital business is up, jumping 39 percent compared with the same period a year earlier. “We are on track to hit three-quarters of a billion in revenues this year as planned, and we were No. 1 on key platforms like iPhone and iPad,” said CFO Eric Brown in an interview.

Digital revenues mainly consist of mobile games, digital downloads and social games built by its Playfish subsidiary.

Mobile revenues totaled $59 million in the third quarter, up from $56 million last year. EA does not break out revenues of its Playfish subsidiary, but said it had 39 million monthly active unique visitors (MAUs) in social games, falling from 58 million in the year-ago period.

Brown explained that its monthly uniques are down, much like those of others in the industry that were hurt when Facebook changed its policies about a year ago on how much games could be promoted on the social network.

“That business is performing well. We are No. 2 in the social games space. MAUs are down for the entire segment, although we are monetizing better, and our strategy is to bring more EA-branded properties to the social network space,” he said.

Yesterday, Monopoly launched on Facebook, joining FIFA soccer and Madden.

The company also announced that it will repurchase up to $600 million in stock over the next 18 month, which demonstrates the company’s confidence in its digital strategy, said EA’s Chief Executive Officer John Riccitiello in the release.

Brown: “We have excess cash and there’s characteristics evolving for our digital strategy, as we build our digital revenue, and it becomes more profitable and predictable.”

Does that mean we won’t see any more big acquisitions–like the $400 million Playfish purchase– by the game maker?

“We still would have the opportunity to do small acquisitions. For instance, we recently purchased Chillingo, so we still have capital to do small scale, but we don’t intend to do large acquisitions in the short term.”

In a sign that aggressive cost-cutting and layoffs haven’t ended the company’s slump, EA forecast fiscal fourth-quarter earnings at about half of what Wall Street expected despite the launch of several big-name titles in the period ending March 31.

“We decided to be a little more conservative, which is a function of how we haven’t seen enough data that purchase behavior is there in yet spades,” Chief Executive John Riccitiello said in a conference call. “We’ve got a strong slate of games and there are reasons to be optimistic. But the better assumption is to be more conservative.”

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“EA is performing well, with quality, sales and segment share up so far this year,” EA CEO John Riccitiello said in a statement. “We are making tough calls to cut costs in targeted areas and investing more in our biggest games and digital businesses.”

If it was, surely we wouldn’t be seeing the sixth consecutive month of declining sales reported by NPD. According to the market research firm, overall sales in the United States in August of hardware, software and game accessories were $909 million–a 16 percent drop from the same period a year ago.

Hardware sales were down 25 percent for the month and 17 percent for the year. Software fared little better. It was down 15 percent for the month and 14 percent for the year.

Six straight months of falling sales. Overall, the industry is down 14 percent for the year, earning nearly $9.1 billion so far in 2009, according to NPD. Is this a trend that can be dismissed with the standard “well, software drives console sales” explanation? I’m not so sure. It’s not like Mario Kart and Madden NFL 10 have disappeared from the shelves. Indeed, they’re still top-selling titles. They’re still driving sales. They’re just driving a hell of a lot fewer of them.

Indeed, Electronic Arts (ERTS) CEO John Riccitiello bemoaned this very fact in an email to employees, released yesterday. “It is discouraging that one of our highest-rated and best-marketed ‘Madden’ titles in years is facing strong headwinds,” he said, adding industry trends “present a challenge.”

Perhaps that’s because we’re in the middle of the worst American recession in 50 years and $40 for a videogame is still $40. I’ll bet $5 and my old Intellivision that the videogame industry will post its first year-over-year loss since 2004 this year.

Hardware Sales:

1. Nintendo DS     552.9K
2. Wii     277.4K
3. Xbox 360     215.4K
4. PlayStation 3     210.0K
5. PSP     140.3K
6. PlayStation 2      105.9K

Top 10 Software Sales:

1. Madden NFL 10 (Xbox 360, Electronic Arts): 928,000
2. Wii Sports Resort (Wii, Nintendo): 754,000
3. Madden NFL 10 (PS3, EA): 665,000
4. Batman: Arkham Asylum (360, Square Enix): 303,000
5. Batman: Arkham Asylum (PS3, Square Enix): 290,000
6. Madden NFL 10 (PS2, EA): 160,000
7. Dissidia Final Fantasy (PSP, Square Enix): 130,000
8. Wii Fit (Wii, Nintendo): 128,000
9. Mario Kart Wii (Wii, Nintendo): 120,000
10. Fossil Fighters (DS, Nintendo): 92,000

But he also indicated that the industry continued to have a tough time in August as demand has slowed dramatically. “This week, market research for August will show that year over year, the industry was down in North America — and that August sales of Madden NFL 10 are down with that trend,” Riccitiello wrote.

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This one is about the recent hookup between Vivendi and Activision, in a big deal that has shaken up the scene:

And this one is an interview with Electronic Arts’ John Riccitiello by WSJ’s Nick Wingfield: